Property rounds: Landlords face retail closures head on

The effect on brick-and-mortar stores from the shift toward online shopping has been well-documented, but property owners are doing their best to change with the times.

According to Forbes, 2017 set records for closure announcements in the retail sector with 7,000 stores shutting their doors. That number is expected to increase to 12,000 this year, leaving property owners with the task of finding ways to replace or repurpose their spaces rather than deal with empty spaces.

“They are forced into rethinking their overall plan,” said John Angel, president of Fairfield-based. Angel Commercial. “Retail in a traditional manner is much different today and I think it will continue to change going forward.”

Mixing it up

Angel said landlords are working to mix things up with different businesses that aren’t as vulnerable to growing e-commerce trends.

“The folks that are recognizing the vulnerability of some of these tenants; there is no question that they are going to have to figure out what they are doing going forward,” Angel said.

Leasing spaces to service-oriented businesses that require a physical presence has been an option that has taken on new importance. But that gets tougher the larger the vacancy, with shopping centers and malls evaluating ways they can repurpose or revamp properties to boost the customer experience.

Additions to malls and shopping plazas geared toward entertainment, fitness and food have been prime examples in recent years as property managers work to create an experience that goes beyond retail. The Connecticut Post mall in Milford, to name one example, features a movie theater along with a string of restaurants and a new Dave & Busters restaurant and arcade slated to open in the fall.

The Westfield Trumbull Mall proposed plans recently to include residential properties on land near the mall. Pending a zoning change approval, owners want to add roughly 300 residences and a mix of other ventures to the campus to help reposition itself for changing shopping habits, according to previous reports.

Big box, big vacanies

Landlords have dealt with big-box closures in a variety of ways. In the Danbury area, some have split the space into smaller leases, some have shifted tenants around and some have simply left the space vacant until the right tenant comes along.

A major downsize by Sears in 2016 had no impact on the vacancy rate at Danbury Fair as clothing retailer Primark took over 70,000 square feet given up by the iconic department store. Sears continues to operate at the mall in slightly more than 100,000 square feet.

In addition, Danbury, Norwalk and Milford will have to account for large vacancies soon following the closures of Toys R Us and Babies R Us locations throughout the region.

Though Greenwich has fewer big box spaces, the downtown shopping corridor on Greenwich Avenue has felt the repercussions of the retail downturn.

One of its biggest vacancies, the former posh storefront for Ralph Lauren, has been empty more than a year. The second half of 2017 saw many retailers follow suit by either shuttering or opting against renewing their leases.

But the trend appears to be changing in the last few months. Local, regional and national brands have signed leases for storefronts on Greenwich Avenue, including Blue Mercury and Warby Parker as well as small businesses such as Countdown Fitness and Fifi & Bella.

“When you look at (Greenwich Avenue) and see vacancies, it’s more indicative of retail having a moment and figuring themselves out,” said James Ritman of Newmark Knight Frank. “If you look at the street and know what’s going on behind the scenes, there are a lot of deals chasing open spaces.”

Filling the gaps

When Sears elected to downsize at the Paramus Park Mall in New Jersey, mall owner GGP found a solution in Norwalk-based Stew Leonard’s, which is taking over half the Sears space for its first grocery store in New Jersey.

As in Connecticut, the Paramus Park Stew’s will include barnyard characters and animatronics to entertain as people shop, as well as the store’s signature farm silo.

GGP is the developer of the SoNo Collection mall in South Norwalk, with Bloomingdale’s and Nordstrom to open department stores there when construction is completed in late 2019. In previous statements, GGP CEO Sandeep Mathrani has articulated a vision of malls becoming “mini cities” with a mix of draws -- the SoNo Collection’s top level will include a large working space with big windows looking out on Long Island Sound.

“Layer on the embedded opportunities to recapture space in department stores, and you have a platform of growth,” Mathrani told investment analysts in a February conference call.

A few miles down I-95, the Stamford Town Center mall has been among the local shopping centers to have weathered changes in the big-box market.

Its Macy’s store still operates, having survived the scores of closings carried out last year. In 2014, a Saks Fifth Avenue store occupying some 75,000 square feet closed at the mall, but the storefront did not stand empty for long -- a Saks OFF 5th store opened the following year in the same space.

Several years before Saks Fifth Avenue’s closing, the mall had adapted to another major departure when it developed its restaurant row on Tresser Boulevard, where a Filene’s Basement outlet had once stood.

Jonathan Litt, founder and chief investment officer of hedge fund Land & Buildings was elected last month to the board of the mall’s owner, Taubman Centers. While he has frequently criticized Taubman’s management, he believes class A malls can still be viable in the long term.

“The bottom line is Taubman owns an extraordinary portfolio of malls,” Litt said in a recent interview. “The future of the Taubman malls is bright - and it gets lost in the whole retail-real estate narrative. We’re quite excited about these assets and markets they operate in.”

Includes contributions from Christopher Bosak, Macaela J. Bennett, Alexander Soule, Sophia Kunthara and Paul Schott.